Antitrust Law Daily Wrap Up, ADVERTISING—CalCtApp: California Appellate Court Lacked Jurisdiction to Hear Appeal of Trial Court’s Order Staying Lawsuit Over Vehicle Service Contract and Ordering Arbitration, (Jan 16, 2013)

By Peter Reap, J.D., LLM

A California appellate court has decided that it lacked jurisdiction to hear an appeal of a trial court order staying an individual’s lawsuit relating to Toyota Motor Insurance Services, Inc.’s alleged deceptive advertising of vehicle service contracts and ordering contractual arbitration (DeSiqueira v. Toyota Motor Insurance Services, Inc., January 14, 2013, Boren, R.). The order compelling arbitration of the individual’s claims was not appealable and it was not the “death knell” of his case because it was neither impossible nor impracticable for him to proceed with his individual claims. Finally, there were no exceptional circumstances warranting treatment of the appeal as a writ of mandate.

Background

The individual plaintiff, Weber DeSiqueira, purchased a Toyota that has a new vehicle warranty covering repairs and defects for three years or 36,000 miles, whichever occurs first. He also purchased a “Toyota Extra Care Vehicle Service Agreement” (the Contract), an extended service contract administered by defendant Toyota Motor Insurance Services, Inc. (Toyota). DeSiqueira paid $1,145 for seven years of service or 75,000 miles, whichever occurs first. The warranty and the Contract run concurrently, so long as the warranty is in effect. The Contract contains a broad arbitration clause, and prohibits class actions and class arbitrations.

DeSiqueira filed this class action lawsuit in 2009, alleging that the Contract covers the same items as the warranty, in violation of state law. The trial court sustained Toyota’s demurrers without leave to amend and gave judgment to Toyota. On appeal, the court found that DeSiqueira did not state a claim because it was undisputed that Toyota’s service contract covered costs not covered by the manufacturer’s warranty. At DeSiqueira’s request, the appellate court authorized an amendment to allege that Toyota’s misrepresentations or false advertising induced him to enter the Contract.

After remittitur issued in 2011, Toyota sent plaintiff a letter demanding arbitration, relying on a recent Supreme Court decision, AT&T Mobility LLC v. Concepcion (2011) __ U.S. __ [131 S.Ct. 1740], which addresses class action waiver clauses. DeSiqueira did not respond to the arbitration demand. Instead, he filed an amended pleading asserting class claims for unfair competition and deceptive representations made in connection with the sale of services.

Toyota moved to compel arbitration. DeSiqueira asked the trial court to find the arbitration clause unconscionable or unenforceable. The court found that DeSiqueira agreed to arbitrate when he entered the Contract, and the arbitration clause encompasses all of his claims. The court ordered DeSiqueira to submit to arbitration, and stayed his lawsuit pending completion of the arbitration. DeSiqueira appeals.

Analysis

Toyota challenged appellate jurisdiction because DeSiqueira appealed from an intermediate order compelling arbitration. Under the “one final judgment” rule, an order compelling arbitration is not appealable, the court noted. Rather, an appeal is permissible when judgment is entered following arbitration.

The death knell doctrine applied when “an order terminates class claims, but individual claims persist.” (In re Baycol Cases I & II (2011) 51 Cal.4th 751, 762.) It required: (1) a de facto final judgment for absent class members; and (2) circumstances indicating that “any appeal likely would be foreclosed” because no final judgment was apt to be entered on plaintiff’s individual claims. (Id. at p. 757-759.) The Supreme Court has “repeatedly reaffirmed that an order that denies class certification or otherwise extinguishes class claims in their entirety is appealable, but only in cases in which individual claims survived.” (Id.at pp. 761-762.)

As to the first part of the Baycol test, the trial court stayed—but did not dismiss—DeSiqueira’s class claims. If the court stayed class litigation while ordering the plaintiff to arbitrate, the order was not appealable because it was not tantamount to dismissal and did not terminate the class claims. Nevertheless, the parties agreed that the order in this case amounted to a dismissal DeSiqueira’s class claims, leaving only his individual claims, according to the court.

The second part of Baycol remained. That question measured the probability that “any appeal likely would be foreclosed” because of a risk that no final judgment will be entered on DeSiqueira’s individual claims. The death knell doctrine only applied when it is unlikely the case will proceed as an individual action.

Here, DeSiqueira suggested that his possible recovery of $1,145 “coupled with the right to recover attorney’s fees and costs,” increased the likelihood he would proceed with individual claims. Because DeSiqueira did not argue that it is impossible or impracticable to proceed with his claims, the death knell doctrine did not apply, the court ruled.

Next, DeSiqueira asked the court to treat his appeal from the order compelling arbitration as an extraordinary writ. In exceptional situations, a party aggrieved by an order compelling arbitration could seek appellate review of the order by a petition for writ of mandate.

However, DeSiqueira made no showing of exceptional or unusual circumstances. Multiple cases were pending before the state Supreme Court involving the issue presented in this appeal, i.e., the effect on state law of the federal decision in Concepcion. A premature ruling in favor of DeSiqueira could lead to lengthy, costly and ultimately futile discovery on the class claims. Under the circumstances, it was prudent to conserve resources and allow DeSiqueira to proceed to arbitration on his individual claims while awaiting a definitive ruling from above, the court determined.

The viability of DeSiqueira’s class claims would not evade review, the court added. After his individual claims were arbitrated and a judgment is obtained, a plaintiff was entitled to review of the trial court’s interim rulings.

The case is No. B237534.

Attorneys: A. Clifton Hodges (Hodges and Associates) for Weber DeSiqueira. Sascha Henry (Sheppard, Mullin, Richter & Hampton) for Toyota Motor Insurance Services, Inc.

Companies: Toyota Motor Insurance Services, Inc.

Cases: Advertising ConsumerProtection CaliforniaNews